Correlation Between Engineers India and Maharashtra Scooters

Can any of the company-specific risk be diversified away by investing in both Engineers India and Maharashtra Scooters at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Engineers India and Maharashtra Scooters into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Engineers India Limited and Maharashtra Scooters Limited, you can compare the effects of market volatilities on Engineers India and Maharashtra Scooters and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Engineers India with a short position of Maharashtra Scooters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engineers India and Maharashtra Scooters.

Diversification Opportunities for Engineers India and Maharashtra Scooters

-0.24

Correlation Coefficient

Engineers India  Maharashtra Scooters

Very good diversification

The 3 months correlation between Engineers and Maharashtra is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Engineers India Limited and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters and Engineers India is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Engineers India Limited are associated (or correlated) with Maharashtra Scooters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Scooters has no effect on the direction of Engineers India i.e., Engineers India and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between Engineers India and Maharashtra Scooters

Assuming the 90 days trading horizon Engineers India Limited is expected to generate 1.78 times more return on investment than Maharashtra Scooters. However, Engineers India is 1.78 times more volatile than Maharashtra Scooters Limited. It trades about 0.06 of its potential returns per unit of risk. Maharashtra Scooters Limited is currently generating about 0.1 per unit of risk. If you would invest  8,502  in Engineers India Limited on October 12, 2024 and sell it today you would earn a total of  9,176  from holding Engineers India Limited or generate 107.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Engineers India Limited  vs.  Maharashtra Scooters Limited

Engineers India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engineers India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Engineers India and Maharashtra Scooters

The main advantage of trading using opposite Engineers India and Maharashtra Scooters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engineers India position performs unexpectedly, Maharashtra Scooters can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Maharashtra Scooters will offset losses from the drop in Maharashtra Scooters' long position.

The idea behind Engineers India Limited and Maharashtra Scooters Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.